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Category:
News /
Personal Finance /
National Budget
/ March 2008
Small Business Benefits in Budget 2008/2009
SMMEs are set to receive tax relief from finance minister Trevor
Manuel this year. Announcing several tax proposals in his 2008
budget speech, finance minister has revealed government would take
further steps to reduce the tax compliance burden on small
businesses.
The budget review explains these measures are aimed at supporting
small businesses, increase entrepreneurship by reducing compliance
costs and encouraging the formalisation of informal businesses.
These initiatives will see SMMEs within the revenue threshold
accessing presumptive tax systems, as well as tax incentives for
venture capital investors looking at qualifying small enterprises
and start-ups. However, National Treasury has warned that this
system is aimed at reducing tax compliance costs and not necessarily
tax liability
This presumptive tax system will be elective. Those who join the
system will be required to remain for a minimum of three years –
unless they exceed the revenue threshold – and will not be able to
rejoin for five years after choosing to exit. Personal services
“rendered under employment-like conditions” and professional
services are excluded from this tax system.
The minister has raised the threshold for businesses that submit VAT
returns on a six- or four-monthly basis to R1.5 million, from
R1.2 million. The VAT registration threshold will be raised from an
annual turnover of R300 000 to R1 million.
On the other hand, SMME should be able to access some funding as
there are some tax benefits that are introduced to those who fund or
invest in SMME.
Trevor Manuel has proposed that general venture capital investments,
outside the mining sector, qualify for a 30% up-front deduction.
Annual deductions are to be capped at R500 000 for individuals,
R750 000 for corporations and R7.5 million for venture capital
funds.
These tax incentives are targeted at assisting high growth and
hi-tech companies with an annual turnover of up to R14 million or
gross assets of up to R7 million.
On the Personal Front
Individual taxpayers will get a R7.2bn break from Finance Minister
Trevor Manuel, who made widely expected adjustments to personal tax
schedules in his Budget delivered in parliament recently. This
should go a long way in helping individuals with the inflationary
pressure experienced recently.
The bulk of the tax relief goes to "lower middle income earners". In
his speech, Manuel said a third of the tax benefits would go to
people whose taxable income is below R150 000, and 28% of the
benefit going to those earning income in the R150 000 to R250 000
bracket.
The tax threshold has been set at R46 000 a year for individuals
younger than 65, and R74 000 for individuals 65 and older.
Basically individuals earning a yearly stipend of R60 000 would pay
an amount equal to an average rate of 4% of earnings. This results
in a saving of R540.
Individuals earnings R150 000 a year would pay tax to an amount of
14% of earnings and save R1 205, while individuals earnings an
annual sum of R400 000 would pay an amount equal to an average rate
of 28% and save R4 655.
Manuel also increased the tax-free thresholds for interest and
dividend income from R18 000 to R19 000 for under 65s and from
R26 000 to R27 000 for 65s and older.
The annual exclusion threshold for capital gains or losses would
rise from R15 000 to R16 000.
Consumers should therefore do personal budgets, tighten belts a
little bit to help in easing the current economic pressure in SA
which include the power crises, the petrol price and oil price hikes
coupled with equity market uncertainties like the recession in the
US.
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